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State applies for $60 million grant for health care payment reforms

By John Lyon

Arkansas News Bureau

LITTLE ROCK — Arkansas has applied for a $60 million federal grant for its planned overhaul of the payment system for health care providers, state Department of Human Services Director John Selig said Monday.

Selig said the state Medicaid program submitted its application last week for the State Innovation Model Testing grant. The money would help the state transition from a system in which health care providers are paid for every service they provide to a system in which they would be paid for bundled episodes of care.

Implementing the change is expected to cost $32.8 million over a 3 1/2-year period, beginning in January 2013.

“That’s a significant sum, but putting it into perspective, that would allow us to achieve lasting and fundamental quality and cost improvements for less than 1 percent of our current annual expenditures with the potential, if successful, to return over $1 billion in savings to the state Medicaid program through 2020,” Selig said in a news release.

“Moreover, the initial investment is far less than the cost that would be incurred if the state were to outsource the program to a managed care company as many states have done,” he said.

The state Medicaid program is projected to see a budget shortfall of between $250 million and $400 million in the fiscal year that begins July 1. The payment system reforms are aimed at lessening the impact of the shortfall as well as improving outcomes for patients.

Selig also said that on Monday the state Medicaid program began tracking three conditions: Upper respiratory infections, perinatal care and attention deficit/hyperactivity disorder. He said the information gathered will be used to reward high-achieving providers, improve the quality of care and lower costs.

“This is a landmark moment for our state’s health care system,” he said, adding that it is “merely the beginning.”

Over the next three to five years, nearly all insured Arkansans will gain access to community-based centers, or “medical homes,” where their care will be coordinated with an emphasis on wellness and prevention, Selig said.

Also, most acute care and complex chronic conditions will be better managed under the new system, he said.

Republican legislators have expressed reservations about the overhaul. The Republican House Caucus has said that if the GOP wins a majority in that body in November, the caucus’ agenda will include looking at other approaches.